LNG & NATURAL GAS IN NEW ENGLAND
Natural gas is the cleanest-burning fossil fuel. As such, it is the fuel of choice for large users of energy, including power plants, manufacturers and commercial developers concerned about maximizing energy efficiency and meeting air-pollution standards. In recent years, the price of natural gas has increased significantly and very large fluctuations in price have been experienced nationwide. In Fall River, residential customers have seen their natural gas bills increase by 50% because of these price increases. As the demand for natural gas continues to grow, and if the available supply of natural gas does not grow with it, further increases in price will almost certainly occur. It might even become difficult to meet existing residential, business and power plant requirements.
Companies that produce electricity in gas-fired power plants depend on a reliable and economical natural gas supply. The Fall River region is a major producer of electricity and one-third of all natural gas consumed in New England is used to make electricity. By 2010, natural gas is expected to fuel half of our region's electric generating plants. New England is second only to the State of Texas in its reliance on gas-fired electric generation. An affordable source of gas supply is essential to the reliability of our electricity supply.
History of LNG in New England
New England's access to natural gas has traditionally been constrained, given our location at the end of the North American pipeline grid. Discoveries of natural gas in the waters off Nova Scotia (Eastern Canada) had been expected to change this picture. However, these supplies are much smaller than anyone expected and the region cannot look to them to help us out in any large measure. Yet natural gas demand, especially for power generation, continues to grow. Spot (short term) prices experienced in the region during the last three winters have clearly signaled that New England remains short of supply, especially during periods of sustained cold weather.
LNG has been part of New England's supply mix since the early 1970s, when Cabot Corporation's Distrigas subsidiaries initiated LNG imports through the LNG receiving terminal located in Everett, Massachusetts. Although LNG imports to the US diminished sharply in the mid-1980s during the gas "bubble", they have recently recovered and have been growing rapidly with the introduction of new long-term imports from Trinidad, as well as short-term imports from many other locations. Increasing North American gas prices and falling costs of LNG have also provided an incentive for increasing LNG imports.
LNG makes up 30% of the gas supply in New England on days of peak demand, during cold winter spells. LNG is now stored at 31 storage facilities around New England-- 20 of these storage facilities are located in Massachusetts. Unlike most other regions of North America, New England has no underground storage and must rely on LNG to meet its peak requirements. (The three principal types of underground storage sites in the U.S. today are: (1) depleted reservoirs in oil or gas fields, (2) aquifers, (3) salt cavern formations. Unfortunately, New England has no such geological environment). A new LNG plant is under construction in Connecticut. Additional LNG storage will not only help meet peak demands, but will also help limit swings in natural gas prices, which have occurred in recent years and resulted in corresponding increases in electricity prices.
There appears to be a growing consensus, both at the policy level within the Federal Government and on the part of industry trade associates, companies and independent analysts, that new supplies of domestic natural gas are not being developed fast enough to meet the growing demand for this fuel. It appears that imports of Canadian natural gas may actually have fallen during the last three years.
As a result, there is a broad consensus that additional imports of LNG will be needed to close the supply/demand gap. Siting the necessary import facilities close to the markets will reduce the need for additional long-haul pipeline capacity, keeping the costs of these imports as low as possible. Placing these facilities in Canada or the Gulf of Mexico does not ensure that the gas will actually be delivered to our region. In fact, bringing LNG to the Gulf Coast is seen by those states as a way to attract industry away from the rest of the country, including New England.